National Health Service (NHS) IT transformation programme contractor CSC has given comment on its reasons for blocking the iSoft takeover by IBA.
The news that CSC had told healthcare IT provider IBS it would not back its £140-million bid for the ailing clinical software supplier to the NHS £12-billion National Programme for IT (NPfIT) has been widely reported in the last 24 hours, but it's reasoning has remained unknown.
It said a due diligence assessment of the potential impact of the change of control of the key supplier would not be in the best interests of NPfIT.
The systems integrator stated: “CSC has engaged with iSoft concerning their potential suitors since iSoft started their process to find a buyer. Discussions and correspondence regarding IBA commenced in January, and we have continued in active dialogue with the company up to the present date.
“Our ongoing discussions and correspondence with iSoft clearly reflected CSC's concerns and position, resulting in CSC confirming on 28 May, that it does not intend to consent to the IBA transaction.”
It also said that while “iSoft has been struggling to regain credibility after revealing an unexpected hole in its accounts last year,” CSC has been engaged with the company and its banks to explore ways to underpin its long term financial stability. The contractor also currently has around 100 of its own staff fully engaged with iSoft and plans to increase this number.
iSoft did not respond to the comments of IBA and CSC.
Phil Codling, Ovum analyst commented: “It seems nothing can go smoothly for iSoft. It's not unusual for partners and even customers to raise concerns over proposed mergers, but the degree of CSC's influence on iSoft's future is extraordinary, thanks to its prime contractor role on the North Midlands and East [NMEPfIT] regional cluster.” NMEPfIT is made up of three local service provider contracts on the NPfIT that have committed to iSoft software and effectively counts for three fifths of the NPfIT footprint.
Codling said: “CSC is not saying exactly why it is unhappy with the bid from IBA. Its primary concern will be the prospects for effective delivery of iSoft's Lorenzo software, the development of which is literally years behind schedule already. CSC is paid when it hits milestones on delivering within NPfIT – software delays can mean it doesn't get paid or even faces penalties. So perhaps CSC is concerned that the amount of debt IBA would need to take on to finance the purchase would impact development budgets. Perhaps it is also worried about the Australian firm's lack of experience in the UK market and the labyrinthine NHS specifically.”
He added that the door may now be open to other parties, including McKesson and General Atlantic, that were previously interested in acquiring iSoft.
iSoft is still under investigation by the financial services watchdog, the FSA and the Accountancy Investigation and Disciplinary Board as result of discrepancies revealed last year in its accounting practices, which led to it posting a £14.6 million loss.
In September 2006, the government granted it £82m in early payments to ensure software update deliveries that were already late could be met. Soon after the Australian firm IBA revealed it was interested in acquiring iSoft earlier this year.
Ironically, iSoft partner, Torex used to be a distributor for rival, IBA in the UK before the two firms merged in 2003. At the time a complaint brought by IBA against the merger instigated an Office of Fair Trading investigation but was rejected.